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The Guardian Trust Company of Detroit -- the good ol' days

It was, however, the run on the Guardian Trust Company of Detroit, a bank controlled by Edsel Ford, scion of the Ford motor family, that transformed the new crisis into a national one.  The Guardian Trust had done well during the 1920s financing consumer purchases of Ford cars.  When auto sales dried up in the early 1930s, the bank found itself in serious trouble and had been forced to borrow from the RFC.  In early 1933, the RFC balked at providing more money unless the sponsors, who were, after all, the second richest family in the country after the Rockefellers, put in more capital.  Patriarch Henry Ford, now in his seventies and increasingly autocratic and unreasonable, refused to bail out his son.  He had a long-standing antipathy to bankers and could not quite grasp why banks should be allowed to use the money he deposited for making risky loans  -- "It's just as if I put my car in a garage and when I came to get it, I found somebody else had borrowed it and run it into a tree," was the way he saw it.  Faced with a statewide run on its banking system, on February 14, the governor of Michigan issued a proclamation closing all 500 banks in the state for eight days.  The residents of Michigan woke up on Saint Valentine's Day to find that all that they could draw upon was the cash in their pockets.

That is from pp.442-3 of Liaquat Ahamed's Lords of Finance: The Bankers Who Broke the World, a truly timely book.

As for the GTC, here is their Detroit Art Deco building, still standing.  Here is the lobby ceiling.  The splendid building is a National Historic Landmark.

Posted by Tyler Cowen on December 24, 2008 at 07:19 PM in History | Permalink

Comments

Booms often leave good stuff behind--Detroit has a lot of fine buildings from that era, some now empty, like the Book Tower. The Guardian Building is one of the nicest. I personally love the interior of the Fisher Building, for instance:

http://www.farbman.com/images/fisher_interior_lg.jpg

Posted by: matt wilbert at Dec 24, 2008 9:40:21 PM

Here is a quote from another recent book on the history of monetary institutions, which you might want to check out:

“In Europe they mobilize armies and navies. In America we mobilize bank reserves.”

From William L. Silber, “When Washington Shut Down Wall Street: The Great Financial Crisis of 1914 and the Origins of America’s Monetary Supremacy” (Princeton, 2007), p. 24, quoting Senator Knute Nelson of Minnesota (of the Senate Banking Committee), a few days before he questioned Paul Warburg, who was a candidate to become a member of the Federal Reserve Board in 1914.

This is an important book on the origins of modern financial institutions, though deeply flawed in its uncritical acceptance of the standard rationalization of the Fed, and its misunderstanding of the causes of the financial panics which served as ammunition to create a central bank in the U.S.

Posted by: Bill Stepp at Dec 24, 2008 10:06:18 PM

@ matt wilbert:

Amen. Detroit has some absolutely gorgeous architecture. It makes the place even more desolate, because you really see the by-gone glory.

Posted by: Matt at Dec 25, 2008 1:09:47 AM

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